Charges Allege Conspiring Against Client
The Illinois ARDC has filed a complaint charged two partners of of a self-adevertised “boutique law firm” with using a client’s confidences and secrets of a former client. The charges allege that the lawyers had agreed to provide legal services to a client that provided them with computer services. The client was the sole shareholder of a company that provided hardware and software computer services. An exchange of legal for computer services on a “work trade” basis was arranged.
The key allegations relate to the “lead employee” of the client’s business. The lawyer learned that the client was receptive to offering an ownership interest in the business to that employee and that the client had no “anti-competition” agreements with any of his employees.
The firm allegedly conspired with the employee to start a competing business and lure away the client’s work force. One of the partners allegedly “formulated a plan to start a computer services business that she knew would compete directly with {the client’s] business” on behalf of the employee and entered into a business arrangement with the new entity. The client continued to be represented by the firm and was not advised of the firm’s dealings with the employee. The client’s relationship with the employee was destroyed and his business had to be closed.
Thus:
As an attorney for James Throgmorton [the client], Jackson was acting as a fiduciary with respect to Throgmorton’s business plans regarding Computer Warehouse and M.O.C.C.I., LLC. Because of this fiduciary relationship, Jackson was obligated to exercise at all times the highest degree of honesty, loyalty and good faith regarding her handling of Throgmorton’s business matters and was prohibited from taking action for her own benefit or enrichment. As a consequence of this fiduciary duty and relationship, Jackson was prohibited from engaging in actions that gave preference to her own business and personal interests over the interests of Throgmorton and his business interests.
Jackson knew that Mayer [the employee]intended to hire Throgmorton’s Computer Warehouse employees as NCS employees. Jackson further knew that Computer Warehouse employees had no employment agreement which constricted their ability to bring the clients they served at Computer Warehouse with them to NCS. When she assessed the potential viability of opening a computer services business with James Mayer, Jackson knew she was using confidential knowledge that she had gained about Computer Warehouse while representing Throgmorton.
By going into business with Mayer, Jackson acted on confidential knowledge she had gained while representing Throgmorton; including, but not limited to, knowledge from Throgmorton that Mayer was receptive to a business arrangement that would permit him to gain an ownership interest in a computer business which provided the same services as Computer Warehouse, and knowledge that Computer Warehouse employees were free to leave Computer Warehouse unfettered by anti-competition clauses in the terms of their employment.
The charges are brought in a single complaint against both partners in the law firm, although most of the interaction with the employee was through a single lawyer. Indeed, it appears from the above quote that only lawyer Jackson is charged with the core offenses. It is alleged that the other partner was involved in the representation of the client and took an interest in the new business entity. If the charges are proven, it appears that there may be a legitimate questions concerning whether both partners are equally culpable.
Update: I was attempting to describe the charges made by the Administrator and have no idea about the quality of the underlying evidence or any prediction as to what the outcome will be after the evidence is presented. (Mike Frisch)